Sustainability Linked Bonds and Transition Bonds

Climate Finance & Investment

Two instruments that are constantly confused with each other and with green bonds. What separates a sustainability-linked bond from a transition bond.

A light bulb lying on cracked dry earth, filled with soil from which a green seedling grows.

As appreciation of the urgency of climate change grows, several innovative financial instruments have been developed and deployed to raise capital for action, including green bonds, transition bonds, and sustainability-linked bonds (SLBs). However, confusion remains about the basic concepts of these instruments and the differences between them. This piece focuses on demystifying two such instruments: sustainability-linked bonds (SLBs) and transition bonds.

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